Huang has come up with a hand-held gaming device from
Nvidia itself. The executive, who co-founded the chipmaker in
1993, has pushed it toward smartphones and tablets as those
products demand better graphics for games and videos. Now he’s
looking to seed a future centered on mobile-game platforms like
Google Inc. (GOOG)’s Android, which is free to license, rather than
consoles from Sony, Nintendo Co. or Microsoft Corp. (MSFT)

“This is going to be the best way to enjoy games in the
future,” Huang, 50, said in an interview. “We felt that
there’s an opportunity for someone to make the open ecosystem
more enjoyable.”

Nvidia’s Shield, unveiled at the Consumer Electronics Show
in January, resembles a console’s controller with a pop-up
screen, and works for games like “Angry Birds” made for
portable devices. It can connect to a TV, projecting play onto a
big screen without consoles like the Wii U, Xbox 360 or
PlayStation 3. It can also link wirelessly to some PCs, giving
players access to pricier titles like “Call of Duty.”

The company, based in Santa Clara, California, was a
pioneer of specialized chips that improved computing graphics
and brought lifelike images to screens.

Graphics Wars

Over time, the market narrowed to a fight between Nvidia
and ATI Technologies, now a part of Advanced Micro Devices Inc. (AMD)
The rivals leapfrogged each other in performance and market
share in both personal computers and game consoles. While
Nvidia’s current design is rated the best by reviewer sites,
consoles coming to market this year had their technical
specifications laid out as much as a year ago.

By latching onto the most widely used system in mobile
phones, Nvidia is wooing gamers seeking more mobility and
flexibility. The company is looking to spur development of more
intensive Android games that require graphics power from chips
like Nvidia’s to create realistic environments.

Mobile Shift

It’s a gamble for Nvidia, which gets more than 60 percent
of sales from graphics processors it makes for other companies’
PCs, consoles and tablets. The Shield, set to debut in the
second quarter, will compete with a new generation of consoles
from Nintendo, Sony (SNE) and Microsoft. The PS4, Sony’s next gaming
console, was unveiled last week in New York.

U.S. sales data suggest players are embracing mobile
platforms like Android at the expense of traditional gear.
Revenue from games downloaded to computers and mobile devices
rose 16 percent last year to $5.9 billion, according to
researcher NPD Group. Revenue from packaged titles, most of
which retail for about $60, fell 21 percent to $8.9 billion.

Huang sees opportunity for Nvidia, which has found a way to
keep revenue growing as the markets for PCs and the graphics
chips used in the machines decline. Nvidia sales grew 7.1
percent last year, in part because Huang branched out into
mobile devices. The shares, which fell 12 percent in 2012,
declined 1.8 percent to $12.30 at the close in New York and are
little changed this year.

Shelling Out

At Sunnyvale, California-based AMD, which will have its
products in all three new consoles, revenue declined 17 percent
in 2012, while its shares dropped 56 percent.

“Nvidia gets that there’s value to be derived from the
ability to play games on the big-screen TV at home, on a PC and
then on a mobile or portable device,” said Lewis Ward, an
analyst at researcher IDC. “The cross-platform approach to
gaming is something that has potential.”

One challenge is to convince Android gamers, who so far
have stuck with smartphones, to shell out for a dedicated gaming
device. Sales of Sony’s $250 Vita and Nintendo’s $170 3DS, for
example, have missed estimates.

Handheld Crowd

While Nvidia hasn’t set a price, a gaming tablet from Los
Angeles start-up Wikipad will cost $249 when it hits the market
in the next few months. Ouya, a Kickstarter-funded console that
has generated buzz with gamers, will cost $99.99 in June. Both
play Android titles and, like the Shield, use Nvidia’s Tegra
chips.

Another question is what resources game developers will
dedicate to Android, which is dominated by $5-and-under casual
titles. Showing off Shield’s capabilities requires play to be
tailored for controllers with triggers and joysticks.

Game creators typically limit development resources to
platforms that have large built-in markets, said Ward, the IDC
analyst. He estimated that fewer than 200 Android-based games
can be played with a controller.

‘Early’ Move

Ultimately, Huang sees a world of cloud-based gaming
networks that handle the heavy computing. The company has begun
selling a line of custom-built server machines called Grid that
are based on its graphics processors. Those products would allow
broadband providers to stream games directly to TVs and
handhelds, with no console. While similar services haven’t
attracted as many subscribers as were targeted, Nvidia is trying
to make it easier to set them up.

“It’s the right move, but it’s early,” said Doug Freedman, an analyst with RBC Capital Markets in San Francisco.
There’s speculation Nvidia had no choice because its chips
weren’t included in the Wii U and won’t be in coming consoles
from Sony and Microsoft, he said.

Sony declined to comment on its PlayStation suppliers, said
Dan Race, a spokesman. Hector Marinez, a spokesman for Nvidia,
declined to comment on the company’s decision process.

Huang said he has set up a dozen trial cloud-gaming
services with the Grid, and is expecting more. Partners include
Agawi Inc. in the U.S., Israel’s Playcast Media Systems and
Japan’s G-cluster Global Corp.

Sony Moves

“We’re not expecting much revenue contribution because the
trials will take many months,” Huang said by telephone this
month. The cloud trials are “the most important indicator of
future success for me.”

Sony, in the meantime, is emulating some of the most
popular aspects of mobile gaming, and doing some things
smartphone games can’t to keep customers using its hardware.

The PS4, planned for release by the holidays, will have a
controller with a touchpad feature, and allow players to share
content and transfer play across devices, including the Vita,
Sony said at a Feb. 20 event. Eventually, the company will offer
older titles for streaming through its Gaikai cloud-based
service. Also, the PS4 is being built on PC architecture, making
it easier to develop games.

Google Play

Until a cloud-based world develops, the Shield will make
use of current technologies. The device resembles Microsoft’s
Xbox 360 controller, with a flip-up high-definition screen
attached to its face. Like consoles, it can also direct play
onto TV screens.

To play non-Android titles like Activision Blizzard Inc. (ATVI)’s
“Call of Duty” without a console, the Shield connects to the
PC. Those machines need to be equipped with an Nvidia graphics
card.

The company was smart to join the Android-based Google Play
marketplace, said Bernard Kim, senior vice president of the
social mobile publishing unit at Redwood City, California-based
Electronic Arts Inc. (EA), second to Activision among U.S. game
makers. “EA’s games for Android will be playable on the
Shield,” he said.

At a minimum, Nvidia has gotten the attention of Sony. The
company is monitoring Shield for any potential impact, Sony CEO
Kaz Hirai said at CES in January.

“It takes a little bit of time to digest what’s going on
here,” Hirai said. “It’s not an easy business to get into.”